The 2025 International Tax Overhaul
A strategic guide to the new landscape shaped by the "One Big Beautiful Bill Act of 2025." This tool helps you understand the critical changes to GILTI (now NCTI), FDII (now FDDEI), and other core regimes to optimize your global tax strategy.
Outbound Incentives & Key Regimes
NCTI & FDDEI: Interactive Impact Analysis
The 2025 law raises effective tax rates on foreign and export income. Use the toggle and inputs below to see how the changes affect your bottom line.
NCTI (formerly GILTI) Calculator
1. Participation Exemption (100% DRD)
Repatriate profits from foreign subsidiaries (10%+ owned) to the U.S. completely tax-free via a 100% dividends-received deduction. This is the core of the U.S. territorial system.
2. Enhanced Foreign Tax Credit
To mitigate the higher NCTI tax rate, the allowable credit for foreign taxes paid has been increased. You can now claim a credit for **90%** of foreign taxes paid on NCTI income, up from 80% previously.
3. IC-DISC Export Incentive
For exporters of U.S.-made goods, this structure converts ordinary income into lower-taxed qualified dividends for shareholders.
Compliance & Anti-Abuse Regimes
BEAT (Base Erosion Tax)
This minimum tax prevents earnings stripping via deductible payments to foreign affiliates. The 2025 law provides certainty by making the rate a permanent **10.5%**, avoiding a scheduled increase to 12.5%.
Transfer Pricing (IRC §482)
All transactions between affiliated companies must meet the "arm's-length" standard. Preparing a robust transfer pricing study is not just for compliance—it's a key strategy to avoid substantial penalties.
Subpart F & CFC Look-Through
Subpart F continues to target passive and related-party income. The 2025 law permanently extends the "CFC look-through rule," which is a crucial exception that simplifies intercompany transactions between foreign subsidiaries.
Inbound Investment: U.S. Tax Rules
Taxation of U.S. Source Income
Foreign persons and corporations are taxed differently depending on the type of income earned in the U.S. Understanding the distinction between business and investment income is critical.
Business Income (ECI)
Income "effectively connected" to a U.S. trade or business is taxed on a **net basis** at standard U.S. corporate rates (21%).
Investment Income (FDAP)
Passive income like dividends and royalties is subject to a **30% gross withholding tax**, unless reduced by a treaty.
Withholding on dividends could be 30%.
Anti-Inversion Rules
Strict rules prevent U.S. companies from reorganizing under a foreign parent simply to avoid U.S. tax. Consequences depend on post-inversion ownership.
Result: New foreign parent is treated as a U.S. corp.
Result: Respected as foreign, but key tax benefits are denied.